Happy Tax Freedom Day 2018!

TAX BURDEN NOW HIGHER THAN AT ANY TIME UNDER NEW LABOUR

As of June 2024, this is out of date. Please refer to Tax Freedom Day 2024 for the updated statistics.
Taxpayers worked 148 days for the Chancellor this year, today is the first day they start working for themselves

• Tax Freedom Day falls on May 29th the latest it's been since 1995

• Brits work 148 days of the year solely to pay taxes, 3 days more than last year, but as of today workers are earning for themselves

• UK Taxpayers will fork out over £700bn to the Treasury this year, 40.65% of net national income

• Cost of Government Day, which factors in borrowing as well taxes is the earliest it has been since 2008. The UK is successfully bringing down the deficit, but spending is still too high.

• With tax demands at record highs, if political parties want economic growth they need to come up with ways to reduce, not increase, the national tax burden. 

Tax Freedom Day is a measure of when Britons stop paying tax and start putting their earnings into their own pocket. In 2018, the Adam Smith Institute has estimated that every penny the average person earned for working up to and including May 28th went to the taxman—from May 29th onwards they are finally earning for themselves.

British taxpayers have worked a gruelling 148 days for the taxpayers this year. More than in any year under New Labour, and three days longer than last year. Britain’s tax burden is moving in the wrong direction.

Government spending choices fall on UK Taxpayers, this year they will fork out £703.7bn—representing 40.65% of net national income. 

Tax Freedom Day in the United Kingdom is now over a month later than in the USA, where this year it fell on April 19th. 

The ONS has revised net national income data and the Adam Smith Institute has calculated this means Tax Freedom Day is later than any day since reliable records began in 1995. The shortest number of days worked to meet HMRC’s tax demands was 122 in 1996. 

In a sign of good news though, Cost of Government Day this year falls on 21st June with the smallest gap after Tax Freedom Day in over a decade. The Cost of Government Day calculates spending over net national income—i.e. including debt-financed government activity, which we must eventually pay, as well as tax-financed government spending.

While it’s good news the gap is getting smaller, the money borrowed to cover the near month-long gap since Tax Freedom Day must eventually be paid off with future taxes. 

With squeezed budgets, low wage growth, inflation above target and high housing costs, UK taxpayers cannot afford budget proposals from Left or Right that attempt to squeeze more money from taxpayers. Instead politicians should look at reducing the size of the state, and reforming our taxes.

The Adam Smith Institute singles out two tax changes that would boost growth and the pay packets of Britons right across the country:

1. UK Government should move to take the poorest out of tax altogether. With budgets tight across the government should boost the take home pay of minimum wage workers by raising the National Insurance Contribution threshold in line with that of income tax. 

2. Governments across the UK should abolish stamp duty (in Scotland the Land and Buildings Transaction Tax). Britain’s most damaging tax, Stamp Duty destroys 75p of wealth for every pound raised. The Government should prioritise cutting the taxes that do the most harm. 

Dr Eamonn Butler, Founder and Director of the Adam Smith Institute, said:

“In the Middle Ages, a serf only had to work four months of the year for his feudal landlord, whereas in modern Britain people have to toil five months for the tax gatherers.

“It appears Britain is stuck in the past with an over-large and inefficient public sector that has cost each of us 148 days' hard labour this year, the most in over two decades.

“Since the the great recession a decade ago Britons have been economising to live within their means. Frankly, it’s about time government did too.”

Mark Littlewood, Director of the Institute of Economic Affairs, said:

“We are almost half-way through the year and it is only now that UK workers are finally working for themselves, not the taxman. Tax Freedom Day demonstrates how heavy the tax burden is in this country with high income tax rates, national insurance payments and draconian VAT and stealth taxes, including the newly introduced levy on sugar.

“While the Government has brought the budget deficit down, for all the talk of austerity, progress is still too slow. Reductions in public spending to relieve workers of the burden they are saddled with will allow them to spend more of what they earn, thus providing the economic boost this country needs.”

John O'Connell, chief executive of the TaxPayers' Alliance.

“Brits are very generous, and need little pushing in order to dig deep to causes that matter to them. That's why ever-higher taxes, raised under the pretence of 'asking' people to pay 'a bit more' is so cruel. Taxpayers work longer and longer, only to see their hard-earned money wasted by politicians who don't care a jot for it. It's time we recognised the sacrifices people have to make to contribute such high taxes, and time too for the government to begin lessening this burden by getting spending under control.”

Sam Dumitriu, Head of Research at the Adam Smith Institute, said:

“Tax Freedom Day is a stark illustration of the UK’s tax burden. It is a reminder that public services such as education, welfare, and the NHS must be paid for, either through taxes or borrowing (taxes on the next generation). 

“The Chancellor must resist the pressure to declare austerity over and turn on the spending taps. Labour too, must be honest with the public. Their proposed £50bn increase in public spending will inevitably lead to even higher tax burdens on ordinary people.

“Further reductions in public spending will be necessary to allow workers to keep and spend more of what they earn.”

Notes to editors:
 
For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, [email protected] | 07584 778207.

The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

Sadiq Khan should accept the case for legalising and regulating drugs

This morning in Mayor's Question Time, Conservative London Assembly member Andrew Boff secured a meeting with Sadiq Khan for him to listen to the case for legalising and regulating drugs.

Daniel Pryor, Head of Programmes at the Adam Smith Institute, welcomed the news:

It’s great to hear that the Mayor is willing to hear the compelling case for taking back control of our violent drugs market by legalising and regulating drugs. Teenagers are being exploited by county-lines gangs, with an estimated 4,000 caught up in smuggling in London alone, precisely because we hand over a drugs market worth £5.3 billion to criminals. Young people are able to access hard drugs from dealers who don’t ask for ID, and users have no access to information on the purity of what they’re taking. Our current approach leads to tragic, entirely avoidable deaths from violent crime, overdose, a lack of support for problem users.

With around 12,000 people in prison for drug-related offences, police time and taxpayers’ money is being wasted on fighting an unwinnable war that makes our streets less safe. We should follow the examples of Canada and many U.S. states by moving towards a harm reduction approach, starting with legalising and regulating cannabis. These efforts were led by a coalition of public health experts and law-and-order conservatives, and the same groups are calling for legalisation in the UK.

Please get in touch with Matt Kilcoyne (07904099599 or 02072224995) to arrange an interview or further comment.

Bring in airline style competition to allow rail to soar

New report by analyst, former journalist and rail expert Adrian Quine for the Adam Smith Institute calls for the introduction of much greater competition in our railways. 
 

• Privatisation of British Rail led to greater number of services and record passenger numbers, but DfT over-specification and monopolistic franchises are costing consumers dearly
• Open Access operators compete directly with incumbent franchises
• Fares on Open Access are cost less per mile with higher customer satisfaction; fares on Virgin’s East Coast franchise where it faces direct competition are 24% cheaper than on its West Coast franchise where it doesn’t
• Open Access (OA) operators are held back by the excessive strictness of the “Not Primarily Abstractive” test, which is designed to prevent OA operators cherry picking the most profitable routes.
• Just 1% of passenger miles are travelled on OA operators despite OA operators topping passenger satisfaction polls.  
• Lack of competition has seen the cost of unregulated ‘anytime’ fares rise by as much as 250% on many routes since the last year of British Rail in 1995, while RPI has risen only 86%
• UK should learn from airline competition and scrap the one-size-fits-all model of franchising to give passengers real choice on long distance routes

A new paper by the free-market Adam Smith Institute is calling for a ‘complete rethink’ of how the country’s passenger rail services are structured. Rather than re-running tired debates between nationalisation and privatisation, the think tank advocates injecting more competition into the current franchise model by making it easier for Open Access (OA) Operators to compete on long-distance routes.

Short term political thinking and civil service micromanagement of the industry is unsustainable, argues report author Adrian Quine. Competition between rail providers on key long distance rail routes will deliver lower fares, reduced running costs, improved customer service, and a greater focus on technology and innovation to ensure a better deal for the passenger & taxpayer.

This new report follows on from the Public Accounts Committee’s (PAC) damning account of the Department for Transport’s management of the Southern rail franchise Govia and the East Coast mainline, which it called a “debacle” and “totally unacceptable”.

20 years on from privatisation, its full promise is yet to be fulfilled. Despite record numbers of passengers and high levels of investment, there is a lack of competition in the market and government is increasingly over-specifying franchise conditions. As consumers are well aware, this has meant uncompetitive delivery of bare bones services and high ticket prices despite the Competition and Markets Authority’s 2015 report ‘Competition in Passenger Rail Services in Great Britain’ calling for greater competition.  

Since the last year of British Rail in 1995 the cost of an ‘anytime fare’ has risen by 250% on many routes, while RPI has risen only 86% in that time.

Fares are dragged down where competition does exist. Virgin’s fare on the West Coast is 32% more than it charges on the East Coast where it faces competition. Between London and Crewe a peak train is £131 for a journey of 158 miles, while the 156 miles between London and Doncaster where there is Open Access competition costs £99 (The two open access operators are even cheaper: £58 with Hull Trains and £52 with Grand Central).

Open Access operators regularly top passenger satisfaction leagues, with Grand Central and Hull Trains taking the top two spots.

Where franchises overlap, unintended competition delivers cheaper and more frequent services. Peterborough is the starting point for GoVia Thameslink Railway (GTR) running a half hourly stopping service to London and onwards to the South Coast. Slower and with more stops, but lower in price than Virgin’s direct service, the GTR route has seen a 70% increase in commuter numbers in just 14 years.

But Open Access competition is rare in the UK with just 1% of passenger miles conducted by OA operators, despite the current Railway Act allowing for such competition. This slow take-up is down to the ‘Not Primarily Abstractive’ test.

At present operators are required by government to ensure that for every pound of abstracted revenue 30% of new revenue has to be generated. In practice this means virtually no competition on long-distance inter-city lines. This is part of the reason the UK is the only European country that runs its commercial inter-city operations on such a model despite the reduction in costs a move to Open Access would deliver to passengers.

Unlike commuter trains, long-distance inter-city services are “closer in style to the airline business” with most routes used by one-off business or leisure passengers who buy their tickets in advance, the report argues. But, while passengers choosing to fly have access to choice between budget operators like Ryanair and premium services like British Airways, rail passengers lack a similar range of options.

And that competition delivers dividends for passengers. Report author Adrian Quine finds that where competition does exist between airlines on intra-UK flights fares were nearly half as much as where there is a sole operator.

The lack of innovation in rail stems in small part from the level of micromanagement by the Department of Transport, which has left private companies hamstrung by what they can provide. The DfT can dictate timetables, frequency of trains, stopping patterns and even minor details such as whether a train has a catering trolley or not.

The paper argues that the level of detail the DfT can stipulate and the power of unions on services with just a single provider often leads to unexpected consequences, such as the recent scandal where half of the carriages on some inter-city services were closed on trains run by Great Western Railway.  

With such high levels of government oversight and control over the railways, what we have is now nationalisation in all but name. But Adrian Quine argues that ‘advocates of nationalisation really need look no further than the current costly’ running of the publicly-owned National Rail to understand why renationalisation would not work.

Opening up inter-city services to competition would drastically improve services, drive down operating costs, reduce fares, boost innovation, and give passengers real choice. By steering people away from road and air onto rail, the paper argues, we will see additional revenue from rail and reduce the burden on the taxpayer.

Competition in the Long Distance inter-city rail market has the potential to bring about the most radical and progressive realignment of our rail system since privatisation and create a true rail renaissance.

Adrian Quine, author of the paper and rail consultant, said:

“The UK rail industry structure is wasteful, bureaucratic and largely not fit for purpose. This paper highlights many of the core issues at stake yet provides radical, achievable solutions that are in the best interests of users, the taxpayer and the wider economy”.

Sam Dumitriu, Head of Research at the Adam Smith Institute, said:

“Renationalising the railways wouldn’t solve today’s problems. We need more, not less, competition on the UK’s railways. Allowing more Open Access operators to compete directly on long-distance rail routes would boost productivity, improve customer service, and deliver cheaper fares”

About the author:

Adrian Quine is an analyst and entrepreneur with a specialist interest in transport and infrastructure. He is a former investigative journalist and broadcaster and has worked for many leading publications including: the BBC, Discovery Channel, National Geographic and the Times. He also writes regular opinion pieces on rail as a columnist for The Telegraph.

Adrian has worked as a consultant on various projects including rail and aviation. He has specialist knowledge in public transport and infrastructure.

Adrian has a particular interest in rail competition and was one of the original founders of ‘Alliance Rail Holdings Ltd’ – he devised the name around a proposed ‘Open Access’ service between the Scottish and Welsh capitals from Edinburgh to Cardiff via the West Coast Mainline and Shrewsbury.

Notes to editors:

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, [email protected] | 07584 778207.

The report ‘A Third Way for Britain’s Railways’ can be accessed here.